Legal & Regulatory

Pre-Investment Due Diligence in India – New Issue of India Briefing Magazine Out Now

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The new issue of India Briefing magazine, titled “Pre-Investment Due Diligence in India“, is out now and available as a complimentary download at the Asia Briefing Bookstore through the month of March.
                        

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India Regulatory Brief: Passage of Bankruptcy Law, New National IPR Policy, and Draft Geospatial Bill Announced

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Passage of Bankruptcy Law

The Insolvency and Bankruptcy Code, 2016 was passed by the Indian parliament on May 11. If the bill gets enacted (after the President’s assent) by May 31, it would improve India’s ranking in the World Bank’s Ease of Doing Business report. India currently ranks 130 out of 189 countries overall and 136th on the parameter of resolving insolvency.

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Reducing the Risks Posed by Legislative and Judicial Actions in India

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By: Siddhartha Thyagarajan

Recent legislative and judicial actions in India’s capital of Delhi have caused significant disruption to the establishment of businesses. In the past few weeks, Delhi has implemented two measures to combat the rising levels of pollution in the mega city. Both have influenced various facets of Delhi’s economy, were particularly harsh on certain businesses, and inadvertently punished consumers in the city. 

The plans were introduced with noble intentions, but affected business operations for numerous companies. Most of these companies were underprepared to cope with changes in Delhi’s economic landscape. This underlined the importance of preparation and adaptation for businesses that operate in India – companies that keep abreast of changes in the legislative and judicial space can mitigate the risks that their businesses face.

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India Regulatory Brief: Real Estate Act, 2016 in Effect, Single Window Clearance System for Drones, Satellite Phones

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Real Estate Bill comes into Effect on May 1

The long awaited Real Estate (Regulation and Development) Act (2016) came into force on May 1. After an eight year long process, the Ministry of Housing and Urban Poverty Alleviation (HUPA) was finally able to notify 69 of the total 92 sections of the Act on April 27. This sets in motion the operationalization of the rules and regulatory infrastructure required by the act.

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How to Establish a Startup in India

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By: Melissa Cyrill

A host of incentives have been unveiled by the Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) government that seek to promote the growth of startups in India. Economic goals are at the core of the government’s reforms, which include ease of doing business, job creation, promotion of skill development, and entrepreneurship. Towards this a national policy framework was launched in February 2016 called the Startup India Action Plan.

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India Regulatory Brief: New Rules to Ease Double Taxation, Contract Workers to Benefit from New Minimum Wage

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New Tax Rules to Bring Relief from Double Taxation

The Central Board of Direct Taxes (CBDT) has drafted new rules regulating the use of Foreign Tax Credits (FTC), bringing relief to corporates and individuals with overseas income. According to national tax experts, the proposed framework allows credits to be claimed on income tax, surcharges, cesses, and Minimum Alternate Tax (MAT) liability.

The rules state that FTC can be claimed only if the taxpayer has paid tax in a foreign country and the same income is subject to Indian taxes. Assuming that income meets this requirement, all claims are to be backed by certain documents, which include a tax certificate from the foreign country – specifying the nature of income and tax amount deducted or paid – acknowledgement of paid taxes, and a declaration of no dispute over the tax amount. The draft rules also clarify that the credit cannot be claimed on a sum that is payable by way of interest, fee, or penalty. Foreign tax that is under dispute will also not be entitled to make credit claims.

The CBDT has opened the new rules to feedback from stakeholders till May 2. Thus, while the FTC rules are welcome, they may be still be subject to changes.

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India Regulatory Brief: States to Regulate Taxi Aggregators, Key Land Reform Bills Passed in Rajasthan

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State Governments Seek to Regulate Taxi Aggregators

Last week Karnataka became the first state to introduce state-prescribed fares for taxi aggregators. In addition to set fares, taxis will have to fix digital meters with printers and register themselves with local transport authorities. Maharashtra, with two of the largest taxi hailing markets – Mumbai and Pune – is set to follow this example. According to a source in the Maharashtra state government, their proposed rules go beyond the scope of Karnataka’s. These will include fare determination based on the cost of the vehicle and its engine capacity; regulation of taxi numbers through an induction schedule, which could adversely impact the employment of driver partners of taxi aggregators; and the ability to cancel licenses for non-compliance.

Different states have responded differently to the entry of transport aggregators. For instance, both Uber and Ola have capitalized on the Delhi government’s call for car sharing as the city struggles to combat its high pollution. Ride sharing services were introduced in Delhi in January with no government resistance, unlike in Karnataka.

The taxi hailing market in India was US $1 billion in annual gross booking value in February 2016 according to RedSeer Management Consulting. This is why Uber and Ola have so far focused on undercutting each other’s pricing to build their respective customer bases. Strict regulation of taxi prices will hurt their business strategies, though benefiting customers in the long run.

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Navigating India’s E-Commerce Landscape

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By: Tracie Frost

According to a study by PricewaterhouseCoopers and The Associated Chambers of Commerce and Industry of India, India’s e-commerce industry could experience a compounded annual growth rate of 35 percent and reach US $100 billion in annual sales over the next five years.  The sector is estimated to realize a 72 percent jump in annual online purchases per individual in 2016.  Additionally, the number of consumers purchasing something online has been increasing by 60 percent or more year over year.

The opportunity for continued growth in India’s e-commerce industry is substantial.  A young population, rising standards of living, better internet penetration, and improved infrastructure for deliveries make e-commerce a tempting investment.  However, anyone contemplating investing in India’s e-commerce sector should carefully consider the many constraints on the industry, the lack of clarity with respect to regulatory guidelines, and India’s political environment.

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